Providence House, Inc.

Transcription

1 Financial Statements Years Ended June 30, 2015 and 2014 The report accompanying these financial statements was issued by BDO USA, LLP, a Delaware limited liability partnership and the U.S. member of BDO International Limited, a UK company limited by guarantee.

2 Financial Statements Years Ended June 30, 2015 and 2014

3 Contents Independent Auditor s Report 3-4 Financial Statements Statements of Financial Position 6-7 Statements of Activities 8-9 Statements of Functional Expenses Statements of Cash Flows 12 Notes to Financial Statements

4 Tel: Fax: Solon Road Cleveland, OH Independent Auditor s Report To the Board of Trustees of Providence House, Inc. Cleveland, Ohio We have audited the accompanying financial statements of Providence House, Inc. (a nonprofit organization), which comprise the statement of financial position as of June 30, 2015, and the related statements of activities, functional expenses and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting polices used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. 3

5 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Providence House, Inc. as of June 30, 2015, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matter The 2014 financial statements of Providence House, Inc. were audited by SS&G, Inc. whose directors and professional staff joined BDO USA, LLP as of January 1, 2015, and has subsequently ceased operations. SS&G, Inc. s report dated September 16, 2014 expressed an unmodified opinion on those statements. September 16,

6 Financial Statements

7 Statements of Financial Position June 30, Assets Cash and cash equivalents $ 632,094 $ 993,283 Cash, restricted 475, ,994 Current portion of unconditional promises to give, net 276, ,773 Supplies inventory 280, ,009 Grants receivable 30,500 41,180 Prepaid expenses 34,193 53,216 Other receivables - 10,906 Total Current Assets 1,728,995 1,873,361 Property and Equipment Land and improvements 308, ,433 Building and improvements 3,137,660 2,634,373 Equipment 203, ,837 Furniture and fixtures 55,036 55,036 3,705,046 3,153,679 Less: accumulated depreciation 994, ,603 2,710,808 2,376,076 Construction in progress 589, ,079 Net Property and Equipment 3,300,744 2,823,155 Other Assets Unconditional promises to give, net 270,162 10,000 Total Assets $ 5,299,901 $ 4,706,516 See accompanying independent auditor's report and notes to financial statements. 6

8 Statements of Financial Position June 30, Liabilities and Net Assets Liabilities Accounts payable $ 101,993 $ 28,364 Accrued payroll 31,895 37,619 Other accrued expenses 55,152 53,417 Total Liabilities 189, ,400 Net Assets Unrestricted Undesignated 539,821 1,136,554 Net investment in property and equipment 3,300,744 2,823,155 3,840,565 3,959,709 Temporarily restricted 1,270, ,407 Total Net Assets 5,110,861 4,587,116 Total Liabilities and Net Assets $ 5,299,901 $ 4,706,516 See accompanying independent auditor's report and notes to financial statements. 7

9 Statement of Activities Unrestricted Temporarily Year ended June 30, 2015 Undesignated Restricted Total Public Support and Revenue Public Support Contributions and grants $ 917,202 $ 1,069,519 $ 1,986,721 Government funding 246, ,275 Federated income 164, ,178 Donated items 203, ,851 Restricted funds released for current activities 419,896 (419,896) - Total Public Support 1,951, ,623 2,601,025 Revenue Special event revenue 436, ,521 Less: direct benefit to donor (167,779) - (167,779) Other income 31,400 (6,754) 24,646 Interest and dividend income 1, ,725 Total Revenue 301,847 (6,734) 295,113 Total Public Support and Revenue 2,253, ,889 2,896,138 Expenses and Losses Program services 1,899,650-1,899,650 Management and general 184, ,886 Fundraising 287, ,857 Total Expenses and Losses 2,372,393-2,372,393 Change in Net Assets (119,144) 642, ,745 Net Assets, beginning of year 3,959, ,407 4,587,116 Net Assets, end of year $ 3,840,565 $ 1,270,296 $ 5,110,861 See accompanying independent auditor's report and notes to financial statements. 8

10 Statement of Activities Unrestricted Temporarily Year ended June 30, 2014 Undesignated Restricted Total Public Support and Revenue Public Support Contributions and grants $ 949,465 $ 182,289 $ 1,131,754 Government funding 209, ,226 Federated income 40,863-40,863 Donated items 180, ,141 Restricted funds released for current activities 494,142 (494,142) - Total Public Support 1,873,837 (311,853) 1,561,984 Revenue Special event revenue 378, ,276 Less: direct benefit to donor (128,112) - (128,112) Other income 47,820-47,820 Interest and dividend income 1, ,296 Total Revenue 299, ,280 Total Public Support and Revenue 2,172,967 (311,703) 1,861,264 Expense and Losses Program services 1,774,422-1,774,422 Management and general 224, ,111 Fundraising 217, ,360 Total Expense and Losses 2,215,893-2,215,893 Change in Net Assets (42,926) (311,703) (354,629) Net Assets, beginning of year 4,032, ,110 4,941,745 Reclassification of Net Assets (30,000) 30,000 - Net Assets, end of year $ 3,959,709 $ 627,407 $ 4,587,116 See accompanying independent auditor's report and notes to financial statements. 9

11 Statement of Functional Expenses Year ended June 30, 2015 Program Services Management and General Fundraising Total Salaries and related payroll expenses $ 1,075,042 $ 97,115 $ 137,768 $ 1,309,925 Special events , ,779 Printing and other fundraising expenses 21,129 6,355 58,344 85,828 Insurance 40,741 3,683 5,260 49,684 Professional fees 196,794 39,540 35, ,334 Utilities and real estate taxes 73,036 6,486 7,969 87,491 Office and miscellaneous 69,643 6,291 8,925 84,859 Interest expense 4, ,216 Supplies and food 149, ,386 Repairs and maintenance 89,035 8,050 11, ,579 Automobile 2,987 1, ,456 Total Expenses 1,722, , ,703 2,323,537 Less: expenses netted with revenues on the statement of activities , ,779 Total functional expenses before depreciation 1,722, , ,924 2,155,758 Depreciation 177,641 16,061 22, ,635 Total Functional Expenses $ 1,899,650 $ 184,886 $ 287,857 $ 2,372,393 See accompanying independent auditor's report and notes to financial statements. 10

12 Statement of Functional Expenses Year ended June 30, 2014 Program Services Management and General Fundraising Total Salaries and related payroll expenses $ 1,072,599 $ 120,585 $ 114,863 $ 1,308,047 Special events , ,112 Printing and other fundraising expenses 16,861-59,025 75,886 Insurance 38,412 4,319 4,114 46,845 Professional fees 121,421 58,885 1, ,500 Utilities and real estate taxes 69,016 7,614 5,959 82,589 Office and miscellaneous 60,385 6,789 6,469 73,643 Interest expense 4, ,600 Supplies and food 153, ,501 Repairs and maintenance 72,678 8,171 7,783 88,632 Automobile 6, ,006 Total Expenses 1,615, , ,044 2,150,361 Less: expenses netted with revenues on the statement of activities , ,112 Total functional expenses before depreciation 1,615, , ,932 2,022,249 Depreciation 158,788 17,428 17, ,644 Total Functional Expenses $ 1,774,422 $ 224,111 $ 217,360 $ 2,215,893 See accompanying independent auditor's report and notes to financial statements. 11

13 Statements of Cash Flows Year ended June 30, Operating Activities Change in net assets $ 523,745 $ (354,629) Adjustment to reconcile change in net assets to cash from (for) operating activities: Depreciation 216, ,644 Gain on sale of property and equipment - (44,860) Change in the present value discount on pledges receivable 6,754 (5,658) Change in allowance for doubtful pledges - (15,943) Change in supplies inventory (48,471) (19,025) (Increase) decrease in assets: Unconditional promises to give (706,060) 35,671 Grants receivable 10,680 (41,180) Prepaid expenses 19,023 (32,439) Other receivables 10,906 1,865 (Decrease) increase in liabilities: Accounts payable (13,374) (4,306) Accrued payroll (5,724) 4,572 Other accrued expenses 1, Net cash from (for) operating activities 15,849 (281,305) Investing Activities Proceeds from sale of land - 1,339,497 Proceeds from sale of investments - 159,975 Purchases of property and equipment (607,221) (551,701) Net cash (for) from investing activities (607,221) 947,771 Financing Activities Proceeds from payment of capital pledges 412, ,434 Net cash from financing activities 412, ,434 Net (Decrease) Increase in Cash and Cash Equivalents (178,622) 997,900 Cash and Cash Equivalents, beginning of the year 1,286, ,377 Cash and Cash Equivalents, end of the year $ 1,107,655 $ 1,286,277 Purchases of Property and Equipment Included in Accounts Payable $ 87,003 $ - Transfer of Construction in Progress into Property and Equipment $ 3,616 $ - See accompanying independent auditor's report and notes to financial statements. 12

14 Notes To Financial Statements 1. Organization Background Providence House, Inc. (the Organization), an Ohio nonprofit corporation, was formed in 1981 for the purpose of providing emergency shelter and residential care on a short-term basis for children in crisis situations which place them at risk for abuse and neglect. The Organization s programs currently support a range of services to children and their families including 24/7 residential childcare for children 0-10 years old in placements lasting up to 60 days (90 days in special circumstances), child and family case management services, educational and visitation programs for children and parents, trauma services and therapies, and a 6-month Aftercare Program with a focus on child protection, abuse/neglect prevention, and family preservation. This is the first such facility, and one of only two currently operating in the State of Ohio, licensed under AM.Sub.S.B.258 with subsequent modifications through S.B.242 and Ohio Revised Code 5101:2-5 and 5101:2-9. Revenue is principally received from private donations from foundations, corporations, individuals and government grants. 2. Summary of Significant Accounting Policies Basis of Accounting The Organization's financial statements have been prepared as recommended by the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for Not-for-Profit Organizations. The AICPA Audit and Accounting Guide includes the requirements of Financial Accounting Standards Board (FASB) Codification, Financial Statements of Not-for-Profit Organizations (the Codification). Under the Codification, the Organization is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted, and permanently restricted. Unrestricted Net Assets Net assets not restricted by donors. This category includes net assets available for the Organization s operating purposes and designated by the Board for specific purposes. Temporarily Restricted Net Assets Net assets limited by donor-imposed restrictions that either expire by the passage of time or can be fulfilled and removed by actions of the Organization pursuant to the stipulations. Permanently Restricted Net Assets Net assets subject to donor imposed stipulations that neither expire with the passage of time nor be fulfilled or removed by actions of the Organization, unless otherwise provided by law. As of June 30, 2015 and 2014, there were no permanently restricted net assets. See accompanying independent auditor s report. 13

15 Notes To Financial Statements Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts. Accordingly, actual results could differ from those estimates. Cash and Cash Equivalents The Organization considers all unrestricted highly liquid investments with an initial maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value because of the short maturities of these financial instruments. Management internally designates certain cash balances held for future purposes as Cash, restricted on the accompanying statements of financial position. Concentrations of Risk Financial instruments that potentially subject the Organization to concentrations of credit risk consist primarily of cash and cash equivalents, and receivables. Cash accounts are insured by the Federal Deposit Insurance Corporation and cash balances may exceed the insured amount from time to time. As of June 30, 2015, two (2) individuals comprised 71% of the grants and net pledges receivable; and as of June 30, 2014, two organizations comprised 78% of the grants and net pledges receivable. As of June 30, 2015, one (1) individual comprised 17% of the total public support and revenue. The Organization had no other significant concentrations of credit risk as of June 30, 2015 and Revenue Recognition on Government Grants The Organization recognizes revenue related to fees for service government grants as the related services are performed or expenses are incurred. Promises to Give Conditional promises to give are recognized when the conditions on which they depend are substantially met. Unconditional promises to give are recognized as pledges receivable and a related contribution when made. Pledges spanning over multiple periods are discounted at an adjusted riskfree rate of 2.5%. The Organization uses the allowance method to determine uncollectible unconditional promises to give. The allowance is based on prior experience and management s analysis of specific promises made. In the opinion of management, no allowance was necessary at June 30, 2015 and See accompanying independent auditor s report. 14

16 Notes To Financial Statements Unconditional promises to give are comprised of the following: June 30, Receivable in less than one year $ 276,167 $ 249,773 Receivable in one to five years 276,916 10,000 Total unconditional promises to give 553, ,773 Less: allowance for present value adjustment 6,754 - Unconditional promises to give, net $ 546,329 $ 259,773 Supplies Inventory The Organization receives a significant portion of its supplies via donated items. Supplies inventory represents the unused portion of these supplies as of June 30, 2015 and The Organization estimates the fair value of contributed supplies based on external pricing data to determine an estimated value. Grants Receivable Grants receivable represents reimbursable grants from the State of Ohio for use in the Organization s activities. Land Available for Sale On May 17, 2013, the Organization entered into an agreement with St. Ignatius High School of Cleveland (St. Ignatius) in which the Organization agreed to sell approximately acres of land bounded by West 32 nd Street on the West, Keene Court on the North, West 31 st Street on the East, and various residential parcels on the South. The purchase price was set at $1,350,000. The purchase was paid in two tranches, the first tranche of $1,000,000 was paid on September 9, 2013, and the second tranche of $350,000 was paid on September 13, During the prior fiscal year, the Organization recognized a gain on sale in the amount of $59,890 which is included in other income on the statement of activities. See accompanying independent auditor s report. 15

17 Notes To Financial Statements Property and Equipment The Organization records property and equipment, including construction in progress, at cost for purchased items and at fair market value for donated items. The policy of the Organization is generally to capitalize assets over $2,500 in value and with a useful life greater than one year. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the related assets. Estimated lives for building and improvements, equipment, and furniture and fixtures range from five to thirty-one and one half years. Fully depreciated property and equipment costs of $322,865 were written off during the year ended June 30, No property and equipment was written off during the year ended June 30, Special Event Revenue Special event revenue primarily consists of gross proceeds from various events held by the Organization. The Organization also received support from special events that are sponsored by other independent organizations. Net support from these independently sponsored events is reported on the statement of activities. Donated Items and Services The fair market value of certain donated items and services represent rents for facility, various supplies and food, repairs, and capital items, which have been recorded as revenue and have either been capitalized or expensed in the statement of activities. A number of volunteers have donated time to the Organization s program services and fundraising campaigns. While an individual must attend several hours of training before volunteering for certain program services, these services do not meet the criteria for recognition as contributed services since the volunteers are not required to have advanced educational degrees or credentials. The Organization benefitted from more than 5,811 (unaudited) volunteer hours in the year ended June 30, 2015, representing a dollar value of approximately $131,038 in volunteer services for the representative fiscal year based on the 2014 Bureau of Labor Statistics Dollar Value of a Volunteer Hour. Functional Allocation of Expenses The costs of providing the Organization s various programs and supporting services have been summarized on a functional basis in the statement of activities. Expenses are generally charged to the specific program for which they are incurred; in some cases, however, certain common costs are allocated among the programs and supporting services benefited. See accompanying independent auditor s report. 16

18 Notes To Financial Statements Evaluation of Subsequent Events The Organization has evaluated subsequent events through September 16, 2015, the date which the financial statements were available to be issued, and has determined that no further adjustments or additional disclosures are necessary. Reclassifications Certain prior year financial statement amounts have been reclassified to conform to the current year presentation with no impact on previously reported net assets. 3. Revolving Line of Credit The Organization has a revolving line of credit with a bank which will expire in May The Organization can draw from this line as needed, in an amount not to exceed $400,000. Interest is payable monthly and is equal to the prime rate (3.25% at June 30, 2015 and 2014). The line is secured by the Organization s assets, except for real property. The Organization had no borrowings outstanding as of June 30, 2015 and Pension Plan The Organization sponsors a Simple IRA that covers employees that are 21 years old and have at least one year of service. The amount of pension expense was $18,871 and $16,621 for the years ended June 30, 2015 and 2014, respectively. 5. Forgivable Mortgages and Loan During the year ended June 30, 2013, Providence House received a forgivable mortgage from the Ohio Department of Mental Health and Addiction Services, now known as the Ohio Department of Mental Health and Addiction Services (OMHAS), and a forgivable loan from the City of Cleveland (the City). The forgivable mortgage from OMHAS bears no interest, is secured by real estate, and need not be repaid as long as the Organization uses the property for the provision of approved mental health services for at least 30 years. The mortgage is forgiven on a monthly basis, through the maturity date which is March, If the Organization defaults under the terms of the agreement, the balance remaining to be forgiven is immediately due and payable. The balance of the note still to be forgiven was approximately $178,400 and $184,000 at June 30, 2015 and 2014, respectively. See accompanying independent auditor s report. 17

19 Notes To Financial Statements The forgivable loan from the City of Cleveland bears interest at 6% annually, and matures on November 1, Principal payments on the loan are deferred and payable on the maturity date; however, the Organization will be released from the obligation to repay the loan and the related accrued interest once the City receives written confirmation from the Director of Economic Development that certain terms and conditions, as defined, have been met. To date, the Organization has met these terms. The balance on the loan, plus accrued interest, was approximately $78,800 and $74,600 at June 30, 2015 and 2014, respectively. During the year ended June 30, 2015, Providence House received a forgivable mortgage from OMHAS not to exceed $191,640. The forgivable mortgage from OMHAS bears no interest, is secured by real estate, and need not be repaid as long as the Organization uses the property for the provision of approved mental health services for at least 30 years. The mortgage is forgiven on a monthly basis beginning in the month in which the project is used for mental health services. The proceeds from the mortgage are to be used towards additional capital improvements for Leo s House. Providence house can request up to 90% of the funds before the project is completed by submitting the appropriate documentation for the project expenditures and the remaining 10% upon completion, as defined. As of June 30, 2015, Providence House had not submitted any requests for reimbursement nor received any proceeds from the forgivable mortgage. 6. Net Assets Temporarily Restricted Temporarily restricted net assets have donor restrictions for time and/or purpose and are as follows: June 30, Case Western Reserve University study $ - $ 30,000 Forgivable mortgage and loan 248, ,334 CARF accreditation, training and certification 17,523 - Staffing and consultants 22,377 - Charles Bowlus Charities 10,365 - Capital improvements 5,309 - Elisabeth s House: Prentiss Wellness Nursery 405,602 66,151 Medical services 306 1,138 Miscellaneous 12,297 10,666 Outdoor equipment Unconditional promises to give, net 546, ,773 Technology upgrades 1,541 5,105 $ 1,270,296 $ 627,407 See accompanying independent auditor s report. 18

20 Notes To Financial Statements Net assets were released from temporarily restricted funds as follows: June 30, Amortization of forgivable loan $ 5,927 $ 6,666 Charles Bowlus Charities 6,270 - Capital improvements 19,691 - Elisabeth s House: Prentiss Wellness Nursery 9,323 4,047 CARF accreditation 8, Medical services 1,332 2,087 Other 11,113 23,447 Staffing and consultants 13, Promises to give 305, ,504 Case Western Reserve University study 30, Technology upgrades 9,564 14, Operating Leases $ 419,896 $ 494,142 The Organization leases copiers and security services under non-cancellable operating lease agreements. Expenses for non-cancellable operating leases and contract services totaled $25,467 and $22,822 for the years June 30, 2015 and 2014, respectively. The following is a schedule of future minimum lease payments required under these agreements as of June 30, 2014: Years ended June 30, Amount $ 6,189 6,189 6,189 2,063 Thereafter - $ 20, Income Taxes The Internal Revenue Service has ruled that the Organization qualifies under Section 501(c)(3) of the Internal Revenue Code and is, therefore, not subject to tax under present federal income tax laws. The Organization has not been classified as a private foundation within the meaning of Section 509(a). See accompanying independent auditor s report. 19

21 Notes To Financial Statements The Organization s income tax filings are subject to audit by various taxing authorities. The Organization s open audit periods are 2012 through the current year. In evaluating the Organization s activities, management believes its position of tax-exempt status is appropriate based on current facts and circumstances. Management has assessed that there are no activities unrelated to the purpose of the Organization and therefore no tax is to be recognized. It is the policy of the Organization to include in management and general expenses penalties and interest assessed by income taxing authorities. There were no penalties or interest from taxing authorities included in management and general expenses for the years ended June 30, 2015 and See accompanying independent auditor s report. 20